5 Things You Must Do Before Year-end
(This post originally appeared on Inc.)
Wait! Don’t close up shop yet. I know you want to dial it back a few for the holidays. But you have at least these five things to do before the end of the year if you want to get off to the right start in 2016.
1. Accelerate your cash.
If you file your tax returns on the cash basis, then the more cash you receive the more taxes you’ll have to pay and the more cash you pay the less taxes you’ll owe. If you are legally able to defer cash receipts into 2016, then do it. You still have the time to talk to your customers and ask them to defer payment until next year (unless they’re also on the cash-flow basis for tax purposes, or not very bright, it’s unlikely they’ll argue). And on the reverse side, if you are able to accelerate payments (deposits, premiums, advances, paying early), then take advantage. Your vendors will love you. This way you can maximize your deductions. In the end, and over time, it all comes out the same. But monitoring your cash flow now may help you save a few bucks on your 2015 taxes–and you’ll be grateful to your younger self for thinking ahead when payment comes due next year.
2. Take inventory.
You know that box of materials you bought three years ago because you got such a good deal? See it still sitting there? Sorry, you’re not going to sell it. You screwed up. You shouldn’t have bought it. Hey–it happens to the best of us. But the good news is that you can at least write it off and get a tax deduction. Which brings me to inventory. If you have it, then count it. Or at least the big-ticket items. You will likely have to report it to the IRS or the bank, and you’ll never know the true balance unless you physically count it now. Most of my larger clients shut down for a period of time at year-end and perform these physical counts. Many of them are also cycle-counting throughout the year. For many, inventory is their largest asset, and keeping control over it is their No. 1 priority. Is this yours? Now is the time to make it.
3. Write off accounts receivable.
You know that customer who’s been promising to pay you for the past year? He’s not going to pay you. Of course, this makes you angry. Join the club–we all have deadbeat stories like that one. But move on. You can’t take a tax deduction for bad receivables unless you have written them completely off your books. Take the time between now and year-end to read through your accounts receivable aging, and then take some bold steps: Write off the uncollectible ones. It’s painful, I know. But you’ll be a better person for it. Start the new year fresh, with a clear mind, a sound heart, and a clean set of receivables.
4. Buy equipment.
Congress has finally made the Section 179 and bonus depreciation deductions permanent. That means you can write off a $500,000 piece of equipment. But there’s a catch. You not only need to buy it this year (and you can also finance it and still get the deduction), but most important, you must also place it into service. There’s still time. If there’s something you’ve had your eye on for the past few months, take the plunge and buy it. And then scramble to get it up and running. This is a big deduction that could have an enormous impact on your 2015 taxes, but only if you take action now.
5. Finally, take some time off.
Let’s face it–next week’s going to be a wash. It’s the week between Christmas and New Year’s. Most of the world will be on vacation. Companies that will be operating will do so on skeleton staffs. Work won’t begin in earnest until the following week. So go off the grid. Devote your week to your family. Or Game of Thrones. Or a really good book about something completely unrelated to your business. You are useless to your company and your employees if you’re stressed out and overworked. You need balance, and you need relaxation. It will benefit everyone.